California banks win approval to merge, over investor's objection

BayCom Corp in Walnut Creek, California, has secured the necessary shareholder votes to acquire Pacific Enterprise Bancorp in Irvine, California, despite public opposition from a major investor who called the deal “ill-conceived” and the $53.1 million price tag “insufficient.”

The $2.4 billion-asset BayCom and the $580 million-asset Pacific Enterprise said in a joint press release on Tuesday that each bank had won the requisite majority of votes from their respective shareholders.

This followed late-stage opposition from Shaul Kopelowitz, who holds approximately 9.9% of the outstanding common shares of Pacific Enterprise. He said Monday he would vote against the deal.

“I continue to believe that the merger consideration” is “wholly insufficient compared to the fair market value for” Pacific Enterprise “and would incur a significant loss of value for the company's shareholders,” Kopelowitz said in a statement provided to American Banker prior to the vote.

Kopelowitz noted that when the deal was announced in September, the price represented a $3.30 per share discount to Pacific Enterprise's book value and a 26.2% discount to its share price. He said that if shareholders had opposed the deal and the seller sought further offers, it could garner a price that would be between 1.10 and 1.45 times its book value.

In a public letter to shareholders, Kopelowitz wrote that "no non-distressed California bank since the Great Recession has sold for less than book value. This leads me to question whether the board fulfilled its fiduciary duties and ran a proper market test before entering into this seemingly value-destructive deal."

Should the deal close as planned early in 2022, Pacific Enterprise shareholders would own about 22% of the combined company.

Executives at BayCom and Pacific Enterprise did not immediately respond on Tuesday to requests for comment and additional detail. The companies did not provide vote tallies in the release.

BayCom, which has closed nine bank acquisitions since 2010, said the deal for Pacific Enterprise would be accretive to earnings in the first year of combined operations. It is projecting cost savings equal to 30% of Pacific Enterprise’s noninterest expense base, which totaled $8.4 million for the first six months of 2021 and $17.6 million in all of 2020.